Noble Energy CEO Cautions Israel on Reopening Gas Tax Issue

April 11 (Bloomberg) -- Noble Energy Inc.’s Chief Executive
Officer Charles Davidson would reconsider the U.S. company’s
investments in Israel if the government raises the issue of tax
rates on natural resources.

Houston, Texas-based Noble and Israeli gas exploration
companies have discovered enough gas under the Mediterranean Sea
over the past three years to supply the country’s needs for 150
years, giving Israel the opportunity to become a gas exporter.

Tax and royalty rates on natural gas and oil production
were reset by a panel in 2010 following the discoveries. New
Israeli Finance Minister Yair Lapid said yesterday he would
reconsider how natural resource developers are taxed, after
opposing the sale of Israel Chemicals Ltd., which mines Dead Sea
minerals, to Potash Corp. of Saskatchewan Inc.

Davidson, who is also the chairman of Noble, said he has
not received any indication that the tax issue would be
reopened. “We continue to invest because I believe the matter
is closed,” he said at a press conference today at the company
offices in Herzliya Pituach, Israel. “If it were to be reopened
we would have to reconsider everything we are doing.”

Davison said the tax and royalties rates were reset after
Noble had already made $1 billion investment in the Tamar field.
“If a government makes a practice of retroactively applying
taxes after risk investments are made, at some point you scare
off any future investment,” he said.

GDP Contribution

The public panel on natural resources proposed by Lapid
will not reopen natural gas policy, Lapid’s spokeswoman said in
a text message today after Davidson’s comments.

Natural gas discoveries off the coast of Israel are
forecast to meet the country’s demand for the next 20 years and
enable Israel to become a gas exporter, according to the Finance
Ministry. The Tamar field, estimated to hold 10 trillion cubic
feet of natural gas, started producing natural gas on March 30.

The supply of the fuel to Israeli companies may save the
country about 1 billion shekels ($276 million) a month in energy
costs and contribute about 1 percent to the country’s gross
domestic product, according to data provided by Israel’s
Ministry of Energy and Water Resources and the Bank of Israel.
The larger Leviathan field is estimated to hold 18 trillion
cubic feet of gas.

Davidson said he has urged the Israeli government to pass a
comittee’s recommendation on exports as soon as possible.
“Before we can move forward with exports, we need an
appropriate export policy from the State of Israel,” he said.
At a meeting with Prime Minister Benjamin Netanyahu and other
officials yesterday, he said that “they recognize that a
decision has to be made.”

Exports Questioned

Netanyahu’s new government will need to decide on Israel’s
policy for natural gas exports. A committee headed by former
Ministry of Energy and Water Resources Director-General Shaul
Tzemach, which examined the question of gas exports, recommended
in August that Israel allow as much as 500 billion cubic meters
(18 trillion cubic feet) of natural gas to be exported. The
amount of exports Israel should allow has been called into
question by public figures, including opposition Labor party
leader Shelly Yachimovich, especially in light of the fact that
the Myra and Sara wells were found to be dry holes since the
publication of the committee’s report.

Further Development

The committee recommendations are adequate to support the
further development of Leviathan, Davidson said. “If the
Tzemach recommendations come into discussion that may put
Leviathan at risk.”

Noble discovered the Leviathan field in Israel’s deep
waters in 2010, when it was the world’s largest find of its kind
in a decade. Woodside Petroleum Ltd., Australia’s second-largest
oil and gas producer, agreed to pay as much as $2.3 billion for
30 percent of Leviathan from the partners. Part of the deal is
subject to Israel finalizing natural gas export rules.

Davidson said Noble is evaluating a number of export
avenues for Israeli natural gas, including a floating LNG plant
and an onshore LNG plant. He said the cost of the project will
depend on its location and size but estimated the minimum cost
to be $5 billion.

He said he expects Noble to double in size over the next
five years in terms of production, cash flow and reserves.